Question 1

A perfectly competitive firm will shut down rather than produce if its

Accepted Answer

A)  price is less than average variable cost. 
B)  price is less than total variable cost. 
C)  total revenue is less than total cost. 
D)  price is less than marginal cost. 
A)  price is less than average variable cost. 
B)  price is less than total variable cost. 
C)  total revenue is less than total cost. 
D)  price is less than marginal cost.

Question 2

The market for lawn services is perfectly competitive. Larry's Lawn Service cannot increase its total revenue by raising its price because ________.

Accepted Answer

A)  Larry's supply of lawn services is perfectly inelastic 
B)  the demand for Larry's services is perfectly inelastic 
C)  Larry's supply of lawn services is inelastic 
D)  the demand for Larry's services is perfectly elastic 
A)  Larry's supply of lawn services is perfectly inelastic 
B)  the demand for Larry's services is perfectly inelastic 
C)  Larry's supply of lawn services is inelastic 
D)  the demand for Larry's services is perfectly elastic

Question 3

-Which of the following characterizes a perfectly competitive market?

Accepted Answer

A)  The market demand curve is vertical. 
B)  The demand for each individual firm's product is perfectly elastic. 
C)  Each firm sets a different price. 
D)  Each firm produces a product slightly different from that of its competitors. 
A)  The market demand curve is vertical. 
B)  The demand for each individual firm's product is perfectly elastic. 
C)  Each firm sets a different price. 
D)  Each firm produces a product slightly different from that of its competitors.

Question 4

Entry in a perfectly competitive market

Accepted Answer

A)  shifts the market supply curve rightward. 
B)  decreases the market price. 
C)  shifts the market supply curve leftward. 
D)  Both answers A and B are correct. 
A)  shifts the market supply curve rightward. 
B)  decreases the market price. 
C)  shifts the market supply curve leftward. 
D)  Both answers A and B are correct.

Question 5

-The figure above shows short-run cost curves for a perfectly competitive firm. If the price of the product is $8, in the short run the firm will

Accepted Answer

A)  make zero economic profit. 
B)  make an economic profit. 
C)  incur an economic loss. 
D)  None of the above answers is correct because more information is needed to determine the firm's economic profit or loss. 
A)  make zero economic profit. 
B)  make an economic profit. 
C)  incur an economic loss. 
D)  None of the above answers is correct because more information is needed to determine the firm's economic profit or loss.

Question 6

-Given the total cost and total revenue curves in the figure above, what is the profit-maximizing output level?

Accepted Answer

A)  30,000 bushels 
B)  60,000 bushels 
C)  80,000 bushels 
D)  All output levels occur between 30,000 and 80,000 bushels are profit-maximizing output levels. 
A)  30,000 bushels 
B)  60,000 bushels 
C)  80,000 bushels 
D)  All output levels occur between 30,000 and 80,000 bushels are profit-maximizing output levels.

Question 7

-Giuseppe's Pizza is a perfectly competitive firm. The firm's costs are shown in the table above. The firm's shutdown point is

Accepted Answer

A)  $12. 
B)  $17. 
C)  $8. 
D)  $2. 
A)  $12. 
B)  $17. 
C)  $8. 
D)  $2.

Question 8

A perfectly competitive firm's marginal revenue

Accepted Answer

A)  increases as the firm produces more output. 
B)  decreases as the firm produces more output. 
C)  is less than the market price of its product. 
D)  equals the market price of its product. 
A)  increases as the firm produces more output. 
B)  decreases as the firm produces more output. 
C)  is less than the market price of its product. 
D)  equals the market price of its product.

Question 9

In the long run, perfectly competitive firms cannot make an economic profit. Why?

Accepted Answer

An economic profit attracts entry by new

Question 10

In perfect competition, the

Accepted Answer

A)  market demand for the good or service is large relative to the minimum efficient scale of a single producer. 
B)  market demand for the good or service is small relative to the minimum efficient scale of a single producer. 
C)  market demand for the good or service can be small relative to the minimum efficient scale of a single producer as long as the goods or services are not identical. 
D)  size of the market demand for the good or service relative to the minimum efficient scale of a single producer does not affect competition. 
A)  market demand for the good or service is large relative to the minimum efficient scale of a single producer. 
B)  market demand for the good or service is small relative to the minimum efficient scale of a single producer. 
C)  market demand for the good or service can be small relative to the minimum efficient scale of a single producer as long as the goods or services are not identical. 
D)  size of the market demand for the good or service relative to the minimum efficient scale of a single producer does not affect competition.

Question 11

In perfect competition, each firm ________.

Accepted Answer

A)  can influence the price that it charges 
B)  produces as much as it can 
C)  is a price taker 
D)  faces a perfectly inelastic demand for its product 
A)  can influence the price that it charges 
B)  produces as much as it can 
C)  is a price taker 
D)  faces a perfectly inelastic demand for its product

Question 12

When a perfectly competitive firm produces the profit-maximizing output and it is at its shutdown point, the firm's ________.

Accepted Answer

A)  marginal revenue equals its average fixed cost 
B)  total revenue equals its total variable cost 
C)  marginal cost is less than its average variable cost 
D)  total revenue is less than its total variable cost 
A)  marginal revenue equals its average fixed cost 
B)  total revenue equals its total variable cost 
C)  marginal cost is less than its average variable cost 
D)  total revenue is less than its total variable cost

Question 13

Economic profit sends a signal to entrepreneurs by telling them where

Accepted Answer

A)  price exceeds marginal cost. 
B)  there are many buyers and many sellers. 
C)  the shutdown point is. 
D)  an above normal return on investment can be earned. 
A)  price exceeds marginal cost. 
B)  there are many buyers and many sellers. 
C)  the shutdown point is. 
D)  an above normal return on investment can be earned.

Question 14

If the market price in a perfectly competitive market is less than a firm's minimum average variable cost, then the firm's total revenue will always ________.

Accepted Answer

A)  exceed its total fixed cost 
B)  be less than its total economic loss 
C)  equal its total cost 
D)  be less than its total variable cost 
A)  exceed its total fixed cost 
B)  be less than its total economic loss 
C)  equal its total cost 
D)  be less than its total variable cost

Question 15

Firms in perfectly competitive industries have a ________ individual demand curve when the price is on the vertical axis and the quantity is on the horizontal axis. The shape of the curve is result of the firm being a ________.

Accepted Answer

A)  horizontal; price taker 
B)  downward sloping; price maker 
C)  vertical; price taker 
D)  downward sloping; price taker 
A)  horizontal; price taker 
B)  downward sloping; price maker 
C)  vertical; price taker 
D)  downward sloping; price taker

Question 16

-In the above figure, if the price is P1 and the firm produces Q2, it is

Accepted Answer

A)  making an economic profit. 
B)  incurring an economic loss. 
C)  breaking even. 
D)  More information is needed to determine if the firm is earning a positive economic profit, zero economic profit, or is incurring an economic loss. 
A)  making an economic profit. 
B)  incurring an economic loss. 
C)  breaking even. 
D)  More information is needed to determine if the firm is earning a positive economic profit, zero economic profit, or is incurring an economic loss.

Question 17

-The figure above shows the marginal revenue and costs of a perfectly competitive firm. When 170 units are produced, the

Accepted Answer

A)  firm has total revenue of $2,720. 
B)  firm's total costs are less than $2,720. 
C)  firm is making an economic profit. 
D)  All of the above are true. 
A)  firm has total revenue of $2,720. 
B)  firm's total costs are less than $2,720. 
C)  firm is making an economic profit. 
D)  All of the above are true.

Question 18

The price elasticity of demand for any particular perfectly competitive firm's output is

Accepted Answer

A)  less than 1. 
B)  1. 
C)  equal to zero. 
D)  infinite. 
A)  less than 1. 
B)  1. 
C)  equal to zero. 
D)  infinite.

Question 19

In a perfectly competitive market that is in long-run equilibrium, a rightward shift in the market demand curve results in

Accepted Answer

A)  the price falling in the short run. 
B)  the firms' economic profits falling in the short run. 
C)  firms leaving the industry in the long run. 
D)  none of the events listed above. 
A)  the price falling in the short run. 
B)  the firms' economic profits falling in the short run. 
C)  firms leaving the industry in the long run. 
D)  none of the events listed above.

Question 20

In perfect competition, a firm that maximizes its economic profit will sell its good at a price that is

Accepted Answer

A)  below the market price. 
B)  at the market price. 
C)  above the market price. 
D)  below the market price if its supply curve is inelastic and above the market price if its supply curve is elastic. 
A)  below the market price. 
B)  at the market price. 
C)  above the market price. 
D)  below the market price if its supply curve is inelastic and above the market price if its supply curve is elastic.

Exam 12: Perfect Competition

A perfectly competitive firm will shut down rather than produce if its

The market for lawn services is perfectly competitive. Larry's Lawn Service cannot increase its total revenue by raising its price because ________.

-Which of the following characterizes a perfectly competitive market?

Entry in a perfectly competitive market

-The figure above shows short-run cost curves for a perfectly competitive firm. If the price of the product is $8, in the short run the firm will

-Given the total cost and total revenue curves in the figure above, what is the profit-maximizing output level?

-Giuseppe's Pizza is a perfectly competitive firm. The firm's costs are shown in the table above. The firm's shutdown point is

A perfectly competitive firm's marginal revenue

In the long run, perfectly competitive firms cannot make an economic profit. Why?

In perfect competition, the

In perfect competition, each firm ________.

When a perfectly competitive firm produces the profit-maximizing output and it is at its shutdown point, the firm's ________.

Economic profit sends a signal to entrepreneurs by telling them where

If the market price in a perfectly competitive market is less than a firm's minimum average variable cost, then the firm's total revenue will always ________.

Firms in perfectly competitive industries have a ________ individual demand curve when the price is on the vertical axis and the quantity is on the horizontal axis. The shape of the curve is result of the firm being a ________.

-In the above figure, if the price is P1 and the firm produces Q2, it is

-The figure above shows the marginal revenue and costs of a perfectly competitive firm. When 170 units are produced, the

The price elasticity of demand for any particular perfectly competitive firm's output is

In a perfectly competitive market that is in long-run equilibrium, a rightward shift in the market demand curve results in

In perfect competition, a firm that maximizes its economic profit will sell its good at a price that is

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Monopoly

Monopolistic Competition

Oligopoly

Public Choices and Public Goods

Externalities and the Environment

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Extension A: Review

Extension B: Review

Extension C: Review

Extension D: Review

Extension E: Review

Extension F: Review

Filters

Firms in perfectly competitive industries have a individual demand curve when the price is on the vertical axis and the quantity is on the horizontal axis. The shape of the curve is result of the firm being a .

-In the above figure, if the price is P₁and the firm produces Q_2, it is